Incubator Y Combinator Grows Its Startup Army

63 companies take the stage at demo day

By Anthony Ha on August 25, 2011

Before a long list of new startups took the stage on Tuesday at Y Combinator headquarters, partner Paul Graham (who's seen as the startup incubator's driving force and public face) promised the audience of venture capitalists and angel investors that their jobs would soon become much easier. Instead of holding meeting after meeting with entrepreneurs, "you can just come here twice a year," he said.

Graham quickly admitted it was a joke, but the program's influence still seems to be growing. Incubator programs (where early-stage companies receive mentorship, a small equity investment, and sometimes desk space for a few months) that are either copying or pushing against the Y Combinator model have been emerging inside and outside of Silicon Valley for the past few years. In fact, 500 startups held a similar demo day[1] last week. Meanwhile, well-known investors Ron Conway and Yuri Milner have announced their Start Fund[2] will make a small investment in every Y Combinator startup.

The incubator's growth was visible at the event itself. The seating area had expanded dramatically compared to past demo days, and there was now a real (if tiny) stage for the presentations. Even with a second demo day scheduled for Wednesday, emails from the organizers had hinted at a long wait list, and blogger Larry Chiang[3], who said he'd been booted from the list, barbecued hot dogs in the parking lot next door in a form of mock protest. Those who actually made it inside included startup celebrities like Conway (nicknamed the "godfather of Silicon Valley[4]") and YouTube co-founder Jawed Karim, as well as real celebrities, namely actor-investor power couple Ashton Kutcher and Demi Moore.

The biggest change was probably the number of startups in the current "class" of demonstrators—63, compared to 43 in the last class[5], which was itself a significant increase from past years. Those included a number of media and advertising startups, such as MixRank[6], which crawls the Web to bring competitive data to online advertisers; DoubleRecall[7], which requires readers to type in key words from simple text ads as an alternative to online paywalls; and Paperlinks[8], which promises a "total solution" to help businesses promote themselves through QR codes[9]. (A number of the more promising ad startups presented "off the record," so journalists were instructed not to write about them yet.)

The long afternoon of presentations prompted some grumbling from attendees. For one thing, it meant that the startups had to proceed with rapid-fire pitches, rather than proper product demonstrations—as Polaris Ventures partner Mike Hirshland complained[10] on Twitter, "Wouldn't it be great if companies actually DEMO'd at 'demo days'???"

Even Graham admitted that watching all 63 presentations would be "sort of a schlep." Nonetheless, he assured everyone, "We didn't become less selective." The bigger class just reflects the increase in applications—Y Combinator still accepts only 3 percent of applicants, Graham said. And a few of the demonstrators told Adweek after the event that they didn't mind the big group, because they could still get one-on-one time with Graham when they asked for it. And after all, one of the reasons they joined Y Combinator was to build connections in the startup world.

"This is still the gold standard for Silicon Valley startups," said Paperlinks CEO Hamilton Chan.